No such thing as ‘the German model’: principles are universal, but routes must vary.

Brendan Martin, 21 October 2013

Given that no prospective British Prime Minister for at least a generation is showing more interest in positive lessons from Germany than Labour leader Ed Miliband you could forgive German social democrats for talking them up on a visit to London.

So it was refreshing -- and all the more convincing -- that the message from the Hans Böckler Foundation’s Roland Köstler this morning was that there is no such thing as ‘the German model’.

Rather, he suggested, other countries should learn from the experience of Germany and other countries in designing their own approach to corporate governance and workplace democracy, while recognising that basic standards should apply everywhere.

Herr Köstler was speaking at a highly informative and stimulating seminar called Workers on Boards, organised by the London office of the Friedrich Ebert Foundation and the High Pay Centre. He began his remarks by noting that, far from being exceptional in the European Union (EU), his country’s commitment to employee voice is closer to the norm.

Nineteen EU countries now have institutional arrangements for worker representation on boards, the most recent to join the majority being France earlier this year. But the precise arrangements vary from country to country, he pointed out.

“There is no German model,” he said. “It is how we behave.” Arguing that there should indeed by a ‘basic standard’ of worker representation throughout the EU, he noted also the significance of the differences between the German and Swedish approaches.

In Germany, companies with between 500 and 2,000 employees have elected worker representatives as one third of their boards, while larger firms have supervisory boards of between 12 and 20 member on which there are equal numbers of shareholder and employee representatives.

Of the between six and 10 employee representatives on the boards of those larger companies, two or three represent the staff union and one represents management. The others are drawn directly from the workforce, but all are subject to election by all the German employees of the company.

Sweden, on the other hand, has two or three workers on the board, and they make up no more than a third of its membership. But alternative routes to worker involvement are provided by the higher level of union membership density there and other avenues, Herr Köstler said.

It is an important point because there are indeed many legal, institutional and cultural differences between countries, and this reality can become an obstacle to change, or even an excuse.

As the Workers on Boards report launched at today's event pointed out, German employers were bitterly opposed to the ‘co-determination’ arrangements when workforce participation on boards was made a legal requirement for all listed and state-owned companies in 1976.

But today the arrangements are seen as one of the key factors in the country’s economic success, and in 2009 the powers of the supervisory boards were extended to include setting executive pay -- a power that led to a pay cut for the chief executive of Volkswagen! (Ok, he still gets nearly €15m a year, but at least he has to justify it to his staff.)

How to achieve such progress in countries, such as Britain, that remain laggards in all kinds of staff involvement? Should we aim for the statutory introduction of the fully fledged German institutional arrangements, or even the earlier forms that eventually led to them?

Certainly, as Herr Köstler said, there needs to be a basic commitment to employee representation if there is to be a reasonably level playing field in a single market, but he is surely right that the detail must vary.

After all, even Germany is falling well behind realities of the global market in that its representative arrangements do not involve employees of German firms outside the country or the increasing number of contingent workers in Germany itself.

One of the very useful publications on the Hans Böckler Foundation’s website defines ‘co-determination’ in terms of principle, stating that it “defines a set of rights that give employees the possibility of actively participating in the shaping of their working environment”.

To bring that definition up to the standards of the modern international labour market, the word ‘worker’ needs to replace ‘employee’ and the rights of workers right along the international supply chain need to be accepted as equally important.

The principle is universal but the next steps to achieving it must vary, and without strong, independent and democratic workers' organisations everywhere they will not be taken.